Briefcase Study: Replacing Paychecks with Retirement Income

What happens if you stop working for money next year?

As people approach retirement, they often run a series of calculations in their heads to determine the right timing. While financial variables play a significant role, non-financial considerations also come into play. Questions such as whether they are truly ready to lose the structure of a workplace or how they will adjust to spending every day with their spouse can weigh heavily on their decision. These are not insignificant factors in deciding when to retire. But what about the financial aspect? Instead of just planning for the immediate future, what if we take a longer-term view?

Facing the Reality of Financial Preparedness

Let’s be honest: when it comes to financial readiness, we all wish we had just a little more. Whether you have $100,000 saved or $3,000,000, how often have you thought, “Another $10,000 (or another million) would make me feel more secure”? The idea of losing a steady paycheck can be daunting. That regular deposit provides a sense of security and even a dopamine boost, making it difficult to imagine life without it.

But let’s reframe the question:

What if you’re forced to stop working next year?

What if a health issue prevents you from earning an income? Or what if a loved one requires your care? Perhaps your employer is downsizing, and you’re on the layoff list. Whatever the reason, you’re done making money next year. What will you do?

For most people, the immediate reaction is to assess expenses and consider what can be cut. They gather credit card statements, review their checkbooks, and scrutinize memberships and cable bills. The mindset shifts to: “How lean can we get?”

And do you know what happens? They discover they can live on much less than they originally thought. Expenses once considered needs start looking more like wants. Stress levels drop, gratitude increases, and the burden of uncertainty lightens.

A Practical Example

Consider a couple who has saved $500,000 but is still far from their goal of $1,000,000. They currently live comfortably on $6,000 per month, factoring in contributions to their retirement accounts. If they claim Social Security at age 62, their combined monthly benefit would be $3,750. That leaves an income gap of $2,250 per month, or $27,000 annually ($6,000 – $3,750 = $2,250 × 12 = $27,000).

Using the traditional 4% safe withdrawal rule, their $500,000 nest egg would provide $20,000 per year. This means they would need to reduce their monthly expenses by $583 to retire immediately ($27,000 – $20,000 = $7,000 ÷ 12 = $583). However, if they can work a few more years, their savings may grow to $600,000, and delaying Social Security could increase their benefit to $4,750 per month. This puts them in a much stronger financial position, offering greater peace of mind.

Even if early retirement becomes a necessity, it does not mean financial disaster. Running the numbers can provide reassurance, particularly in the face of uncertainty and unsettling headlines.

Shifting Your Perspective

Thinking about retirement years down the road can feel overwhelming. The unknowns can make it difficult to feel at peace with the process. But when you frame it in terms of next year—or even today—you may realize you are closer to financial stability than you think. Resourcefulness leads to solutions.

This is not to say you must embrace an austerity lifestyle to retire. Instead, consider how far you truly are from financial trouble. By shifting your perspective, you can reduce fear and ease the burden of life after paychecks end. From this place of renewed confidence, you can reintroduce the wants until you’re living the life you aspire to—not one dictated by fear.

The Big Question

So, what happens if you stop working for money next year? Chances are, you’ll be okay—you’ll figure it out. If you are fortunate enough to continue working, it will be by choice and on your own terms. That freedom may inspire you to give more, live more, and love more. And that sounds like a pretty good outcome.